Recording calls with debt collectors to document or deter abuse-watch out for these and other traps!

We have all heard the recordings telling us that our call “may be recorded for customer service”… Many of our clients in financial distress are dealing with debt collectors. Although there are well-established rules about what collectors can or cannot do, we hear all the time about abuses, such as threats of criminal action, repeated calls at late or early hours, calls of employers or relatives.

We suspect that these abusers think that most people will put up with the abuse and if they do pursue legal remedies, it will be a “swearing contest” in court. While debt collection is legal and proper, we have recommended that our clients document each call and consider recording such calls, but only if certain procedures are carefully followed.

In many states, including California and Pennsylvania, it is illegal to record a call or other interaction without the consent of all parties. So if the call originates in one of those states, a violation could trigger criminal action, or civil penalties. See Tape-recording laws at a glance

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So here is our recommendation: Start the interaction and your recording with a statement something like “I am recording this call, and will record any further calls from you. If you do not want to be recorded hang up and do not call again. If you continue or call again, I will assume you and your company consent”. If the person says they do not consent then hang up.

If a collector leaves a message on your answering service, save the recording. They knew they were being recorded and cannot complain.

Watch out for debt collection scams. Whenever dealing with a collector, be sure to get the name or extension number of who is calling, the name and address of the collection agency, the name of the creditor, the account number, and a telephone number to call back “in case we get disconnected”. Never give any information over the phone, such as Social Security or credit card numbers, dates of birth where you work etc. They are calling you. If they do not have this information that is their problem. Do not fall for the “we need this for verification” scam. Your goal is to get information from them. If they want further information, tell them to put it in writing and send it to the address they have so you can review it with an attorney.

Finally, most old debts have been sold off to debt buyers. While this is legitimate, sometimes companies or collectors who do not really own the debt may try to defraud the true owner by trying to collect on someone else’s debt. Or phony debt collectors. Be wary.

More importantly, if you are having trouble with debt collectors, get legal advice about your rights and options. And please note, every state and situation is different. This post is intended only to alert you in a general way to the potential issues and problems. It is no substitute for qualified and individual legal advice.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Drowning in debt? Losing your home? Here is how to overcome the stress and take back control of your life.

Are you drowning in debt that threatens your life and livelihood? Facing the loss of your home from foreclosure? No doubt you are feeling scared, angry, ashamed or in denial. These are understandable and common reactions, but will they make the problem worse not better. The New York Times recently posted a series of articles which point out how stress does not have to get you down and provide ways to deal with it, reduce its harm and even use your daily stress to make you stronger. NY Times, 7/30/2017- How to be Better at Stress

If you are in this situation, this series of  articles is a must read. It reinforces the approach we try to take in guiding people through these situations. First, take a deep breath and don’t panic or grasp at “too-good-to-be-true” promises. Secondly, take a good look at what the problem is, and plan. Get professional advice from people who are experienced and whom you think you can trust and who can help you map out alternatives. Consider and accept the worst case outcomes, but plan and hope for the best. Third, talk about the situation, with your spouse, children, family, and legal or financial advisers.

If you are in this situation, it may well not be one of your own creation. Even if it is, learn from what you might have done wrong, accept your own role, then stop obsessing over it. Time to move on.

Likewise, recognize what you may not be able to control (decisions by others to hire you or not, expenses greater than income), and work hard to make things happen that you can control (eg job search, cut back spending where possible). Maintain hope and confidence.

It’s not easy but done right, it achieves results. Most of our clients get back on their feet and move one to financial stability and happiness. The hardest thing is often controlling spending and accepting necessary down-sizing. But being able to afford the basics of living and supporting your family is a great achievement, and cause for celebration.

If you need our help or guidance, we are available to help you map out the choices and options that are right for you.

Keeping debt collectors honest and how best to respond to them

We see a lot of people who are dealing with sometimes abusive debt collectors. A recent New York Times article, Jan 13, 2017: How to Keep Debt Collectors Honest and at Bay provides some excellent advice. Among the tips provided (and our tips) are:

  1.  If you are at all unsure that the debt is valid or the amounts are correct, demand documentation to validate the debt. (Debt collectors often do not have this information but be insistent).
  2. Put all requests in writing. In fact, demand the name of the collector, a mailing address and contact information, the name of the original creditor, and the name of the current owner of the debt.
  3. Don’t assume that the collector or the party they claim to represent really own the debt. A lot of bad debts get sold off. Some collectors have attempted to collect “stolen” debt accounts that they do not own.
  4. Do not let collectors call you at work or call neighbors. Demand that they stop, orally and in writing. Keep all those papers.
  5. If the debt is older than 6 years since you first defaulted (unless you entered into a payment plan after that) any suit may be barred in New Jersey by the statute of limitations. (if it is a store credit card, the limitation is 4 years). Demand the date when the debt first became past due.
  6. Do not put up with abuse. If this happens, tell the collector you are recording the call and if possible record it. (Recording a call without notice is a criminal violation in many states and if your collector is calling from one of those states you could get in trouble)
  7. Finally and most importantly, you need to assess your finances and get professional advice. Start with doing a budget for just your basic living expenses (ie food, shelter, transportation, medical care etc). Often there is no money left over to pay debts being collected, or not enough. There are budget forms for you to use on the Forms page of our website. http://www.nv-njlaw.com/bankruptcy-forms-2/
  8. Finally, do not be reluctant to use bankruptcy as a tool to pay, settle or obtain relief from your debts. As we have noted in another blog post, at least one study has shown that those who used bankruptcy to overcome financial distress later had better credit and better access to credit than those who did not.

Dos and Don’ts of Home Loan Modifications

Home Loan Modifications

If you are struggling to make your monthly mortgage payment, you may be considering pursuing a home loan modification. Here are some things you want to be certain to do, as well as some pitfalls to avoid.

Dos

The most important thing to do when investigating the possibility of a home loan modification is to be realistic. Your lender has no legal obligation to change the terms of your loan. They will only give serious thought to doing so if it’s in their best interests, so you’ll have to put yourself in their shoes and try to determine why you should be allowed to modify the loan.

You’ll also want to put together an honest budget before you take any further steps. Look at how much income you have, as well as your other expenses, and be realistic about what you can afford per month. Don’t try to negotiate a modification if you won’t be able to stay current.

Do consider filing a Chapter 13 bankruptcy petition. It may be the best form of home loan modification available. You’ll have the added bonus of the automatic stay in bankruptcy, so that creditors can’t bombard you with calls and letters.

Don’ts

Don’t assume that your modification is permanent—verify it. If your lender agrees to a modification, be careful to clarify that it’s not just a trial modification. A lender will often allow you to amend the terms on an informal basis, but retains the legal right to reinstate the original terms. Keep thorough records of every correspondence between you and the lender, so that you have evidence that the modification is permanent.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

How to handle illegal or improper collection efforts during or after a bankruptcy

When a bankruptcy is filed, the automatic stay prohibits most efforts to collect a debt (with some important exceptions including criminal proceedings and several others). Collection of garden variety unsecured debts (ie no mortgage, car loan or other collateral) is prohibited. Even attempts to collect by demanding personal payment of a mortgage or secured debt are barred. Until the creditor gets a bankruptcy court order lifting the automatic stay, it cannot collect except by filing a claim in the bankruptcy case.

Once a discharge is entered, the debts that are discharged become uncollectable. Mortgage, auto lenders or leasing companies, and other creditors with collateral rights are free to pursue foreclosure or repossession. Even these are only permitted to make efforts to get back their collateral if the loan is in default. Special rules apply to auto loans. If you reaffirmed a car loan or other debt in the bankruptcy case, or if the debt is non-dischargeable, eg child support, alimony, student loans, most taxes, then collection post-discharge is permitted. Judgment liens on real estate may have to be removed by a motion. Debts which did not exist when the bankruptcy was filed or were not incurred during the bankruptcy process are not affected.

Despite these clear rules, we still see debt collectors trying to collect debts in violation of the automatic stay while the bankruptcy is pending. Continued medical bills, demands to pay back bills as a quid pro quo for continued treatment, billing notices, telephone calls and collection letters may continue even though the creditor got notice of the bankruptcy. Such violations provide a basis for a motion seeking sanctions against the offender, or in some cases, a lawsuit for a violation of the Fair Debt Collection Practices Act.

Once a discharge is entered, we have seen debt collectors violating the discharge order. When this happens, the offender can be sued for contempt of the discharge.

How should one handle these situations? First, document all the calls or collection efforts. Keep copies of all letters or notices. Keep recordings of any telephone messages. If a collector calls, pick up the phone, but be sure to demand the name of the person and company calling. Ask for a telephone number and extension “in case we get disconnected”. Politely verify exactly what debt they are calling about and the balance owed. Ask them specifically what they want you to do (you are looking for a demand for payment). Ask for an address to send payment or any letters etc. Do not give them any information at all about where you live, work etc. Write down all the information you get this way. Once you have this information, you want to tell them clearly that you are in a bankruptcy or have gotten a bankruptcy discharge, with the bankruptcy case number. Specifically ask them to “correct your records to show this”. Ask them to verify that they have done this. If there is any abusive language or threats write these down (“excuse me, let me see if I have this right…you are threatening me with [whatever it is].

Once they know that there is a bankruptcy or bankruptcy discharge, tell them that any attempt to collect the debt is illegal and violates your rights under federal law. Demand that they stop. If you have a bankruptcy attorney, refer them to that attorney. If not, you should consider getting one.

At a minimum, write down everything and keep a log. One strategy that can be used is to record the call, BUT you must TELL THE CALLER RIGHT AWAY THAT YOU ARE DOING SO. Recording telephone calls without notice is illegal in many states. If your caller is calling from California, it is a crime.

If you receive a collection demand, you should call or fax notice about your bankruptcy and include a demand to stop collection efforts.

While a single violation is illegal, we generally give collectors at least one “bite at the apple”. (Usually the creditor has gotten the court notice of a bankruptcy already) Once a collector continues  illegal efforts to get you to pay personally after your notice of a bankruptcy, it is time for legal action.

In these situations, it is wise to get proper legal advice.

 

Challenges to the Discharge of Luxury Purchases and Cash Advances

One of the advantages of a Chapter 7 bankruptcy is that it allows you to permanently discharge certain debts, meaning that you will no longer have personal liability for them. As a general rule, credit card debt can be discharged, but there are limits.

Under the bankruptcy laws, any debts arising from the purchase of luxury goods  within 90 days of your petition for bankruptcy  made from a single creditor will be presumed to be fraudulent and non-dischargeable, if the purchases total more than  $650. This result is not automatic. The creditor has to file a Complaint in the bankruptcy seeking non-dischargeability. If it does so, the burden is on the debtor to prove that the purchases or resulting debt were not made with intent to defraud the creditor. Stated another way, a creditor will not be required to prove that you did not intend to pay or that you intended to discharge the debt in bankruptcy. Instead, you will have to  introduce evidence to demonstrate that the purchase was not a luxury, but necessary for the support or maintenance of the debtor or a dependent or spouse, or that the purchase was not made for a fraudulent or improper purpose.

For purposes of the bankruptcy law, a luxury item is considered to be any goods or services not reasonably required by the debtor for his or her own support or for the support of any legal dependent. While the determination of whether an item is a luxury item depends on circumstances, items like food, gas, clothing and furniture are more likely to be considered non-luxury than jewelry, home appliances, books, or a computer.

The same presumption applicable to luxury purchases also applies to cash advances on a credit card or other open end credit plan made within 70 days of filing, to the extent that these total more than $925. This does not apply where the cash advance is for a business purpose.

We generally recommend that our clients stay away from these kinds of purchases or use of credit. Like any unusual or suspect financial dealings, these will commonly result in suspicion and greater scrutiny across the board. When anticipating a bankruptcy, it is generally best to play it straight and stay within the bounds applicable to the “honest but unfortunate debtor”.

That said, a certain amount of legitimate planning going into a bankruptcy is permitted. The wisest course of action is to consult with and follow the advice of an experienced and ethical bankruptcy lawyer.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

How debt buyers and creditors get judgments when they do not have a right to sue, and what you can do about it

Most bad consumer debt is sold off to “debt buyers” who make a good living buying bad debt for pennies on the dollar then collecting it. As a recent New York Times article points out, these creditors have been able to get judgments on debts that are too old to sue on. Worse, when the judgment debtors tried to stop this practice by a class action lawsuit, they were thrown out of court because of a clause in the original loan agreement that forced all disputes into arbitration. Courts have rejected the argument that by going to court themselves, the debt buyers waived their right to rely on this clause.  “Sued Over Old Debt, and Blocked From Suing Back” 12-22-2015

There are some important take-aways here.

  1. Read the credit agreements and understand what you are agreeing to. Some credit cards give you a limited time to “opt out”. Arbitration looks simple and less expensive, but in fact you may be giving away important rights.
  2. Keep your own records of what you have paid or charged. You may need them later.
  3. When faced with collection, demand proof and keep good records of all contacts, letters or communications. Debt collectors are required to provide proof of the debt if you ask in writing. Because they have bought the debt in large bulk purchases, they likely do not have the original documents.
  4. Watch the statute of limitations. In New Jersey, creditors have 6 years from the date of the last payment after default in which to sue. Even a $1 payment after that time has passed could start the clock running all over again.
  5. If sued, seek legal advice and seriously consider filing an Answer IN WRITING, FILED WITH THE COURT. YOUR ANSWER MUST BE IN THE HANDS OF THE CLERK BEFORE THE STATED DEADLINE EXPIRES. Calling the collection attorney does not protect your rights. A qualified attorney can advise you about the rights and defenses you have. These might include
    1. Plaintiff does not own the debt and is not qualified to sue me.
    2. Plaintiff is not entitled to use the courts to sue me. (In New Jersey out of state businesses must file certain reports in order to sue in our courts)
    3. The statute of limitations has expired. (See above and check the law in your state)
    4. If Plaintiff is owed money, the amount claimed is wrong. (This will require production of account records and possibly the loan agreement. You need to carefully assemble your records to show what you think is due)
    5. NOTE,  THESE ARE ONLY EXAMPLES: you are entitled to demand proof, but you may not have a valid claim to the above defenses or you may have other rights and defenses. Always seek legal advice and assistance, even if it is only a consultation.
  6. When dealing with debt collectors, keep careful written records of who contacted you, when and how, and what they said. You may have a counterclaim against the debt collector, but again, proof is key. Do not hesitate to record the conversations, but be sure to tell them, at the beginning of the recording, that you are recording. Not doing this can result in criminal liability in your state or the state where the caller is at.

For many people, debt collection is more likely to be a symptom of bigger problems. You should consult with a qualified attorney about how you can use Chapter 7 bankruptcy to discharge debts you cannot afford to pay, or Chapter 13 to pay what you can afford over time.

Lenders being sued for violating the bankruptcy discharge when they refuse to correct your credit report to show listed debts as discharged

When a debt is discharged in bankruptcy, the Bankruptcy Discharge Order enjoins (ie prohibits) all efforts to collect that debt from the debtor personally. (but enforcement of rights to collateral are not affected). A discharge is central to the “fresh start” that bankruptcy affords. However, in a recent article, “Debts Canceled by Bankruptcy Still Mar Consumer Credit Scores”,  the New York Times reports that several major lenders (including JP Morgan Chase, Bank of America and Citigroup) are under investigation and are being sued for systematically refusing to correct debtors’ credit reports to show their debts as discharged, in an apparent effort to coerce payments in violation of federal law. http://dealbook.nytimes.com/2014/11/12/debts-canceled-by-bankruptcy-still-mar-consumer-credit-scores/?partner=msft_msn?a=1&m=en-us

A nationwide class action against Chase Bank USA NA is now pending in the United States Bankruptcy Court for the Southern District of New York. In a July 22, 2014 ruling, Bankruptcy Judge Robert Drain refused to dismiss that suit. Haynes v Chase Bank USA NA, 2014 Bankr. Lexis 3111, 2014 WL 3608891. Mr. Haynes alleged that Chase had refused to correct his credit report to show that his debt had been discharged in bankruptcy. He charged that it did this as part of a systematic effort to pressure people like him, anxious to improve their credit, to pay discharged debts that were barred from collection efforts.

Chase claimed that it had no obligation to correct the credit report because it had sold off the debt. Judge Drain rejected this argument. He explained that under the facts alleged, Chase had an incentive in seeing payment on these discharged debts. First, if as Mr. Haynes claimed, Chase receives from the debt buyer a portion of the money collected, it would have an  an incentive to help collection. And, he noted, it certainly has under those facts a continuing connection to the debt.

Secondly, while the credit reports list the debt as solder they do not identify the purchaser. Thus, Judge Drain points out, “as far as the debtor is concerned, the only creditor to approach to correct the credit reports is Chase, which, though it appears to be the only game in town, as a mater of policy refuses to correct them…highlighting further the perniciousness of Chase’s allegedly systematic approach to refusing to correct such errors”

At present, the suit is pending, along with similar others. In another case, Judge Drain denied a motion by GE Capital Consumer Lending to have the discharge violation action sent to arbitration under a provision of its loan agreement.

These practices are indeed pernicious and these investigations and lawsuits are a welcome response.  We commonly urge our clients to demand from credit reporting agencies that all discharged debts be marked as having a zero balance and as having been discharged in bankruptcy. If this is not being done, then multiple federal laws are being violated and important rights need to be vindicated by aggressive legal action. Such actions under section 524 of the Bankruptcy Code can and should seek contempt sanctions.

Lessons from the Dark, Lucrative World of Debt Collection

Over the years, we have seen our clients’ individual unpaid debts being collected by one collection agency after another sometimes involving abusive tactics. Many but not all debt collectors are legitimate and law-abiding. But from time to time our clients run into debt collectors who are really abusive. When we have confronted these bad actors on behalf of our clients, they have not hesitated to extend their abuse, including foul language, to us. When he have worked with clients outside of bankruptcy to settle debts or have raised questions about a debt’s legitimacy, we have seen the debt getting handed off to collection agency after agency, each apparently ignorant of the past history or of the questions we have raised about the debt. When we have demanded documentation to support a challenged debt, the response is often to ignore these requests.

A recent expose in the New York Times Magazine entitled “The Dark, Lucrative World of Debt Collection” details the sometimes sordid behind-the-scenes reality of such debt collections. It is eye-opening. Here is a link to it: http://www.nytimes.com/interactive/2014/08/15/magazine/bad-paper-debt-collector.html?a=1&m=en-us&_r=0 As this expose shows, bad debts are a lucrative business. Debt buyers pay pennies on the dollar for bundles of bad debt, that they then try to collect, making large profits. And at some point they will sell the debts off again. What is being handed around is just a list of names, Social Security numbers, contact information, account numbers and supposed balances due. This may or may not be accurate.

These debts can include some that are so old that the right to sue on the debt has expired. In other words, the debt is uncollectible. Although not mentioned in the article, it logically follows from the minimal and often old account information that is sold, the debt may have been settled or discharged in bankruptcy.

The upshot for those facing collections is “debtor beware”.

Based on our experience and what this article reveals, here is some advice to follow if faced with unpaid debts in collection:

1. Don’t assume that the debt collector owns the debt or is authorized to settle it. You should receive a written demand on the debt stating who owns the debt. The demand should state that you are entitled to dispute the debt and if so they will supply proof that you owe it. This is a matter of federal law. If this has not happened, be very suspicious. As the article points out, some supposed debt collectors are thieves trying to collect someone else’s debt.

2. If you settle, make sure you have something in writing from the debt collector making a firm offer. This must have all the account information and must clearly state what payment terms will be accepted as “payment in full” or similar language. When you send in payment, make sure the check has a notation of the debt, the account number and “payment in full” or “payment under settlement letter dated [DATE]” or something similar.

3. Do not respond to threats to send you to jail. These are illegal and bogus.

4. Any time you are dealing with suspected abuse, you should keep a detailed log of who called, the date and time, what was said, and the contact number. The number given may be a bogus one. Always ask for a telephone number “in case we get disconnected”. You might then consider hanging up then calling back claiming you got disconnected.

5. Recording these calls is legal, so long as you tell them you are recording. Knowing they are being recorded will give pause to any legitimate collector. If it does not, then be extremely suspicious.

6. It may make sense to get an attorney involved. If you already have an attorney, then your conversation should be limited to telling the collector that, demanding that he/she “correct your records”, and contact your attorney. If you have hired an attorney to file bankruptcy, most legitimate collectors will then contact the attorney to verify this, then put your debt at the bottom of their stack. This only works if you have really hired an attorney.

7. If you are having these types of troubles, it is probably a good idea to meet with a qualified and experienced bankruptcy attorney to understand that option. You should prepare a household budget showing all your basic living expenses. Whether or not you proceed with a bankruptcy, don’t ignore this option. Bankruptcy under Chapter 13 can allow you to pay your debts to the best of your ability, in a controlled and court-supervised process.

 

Protecting Your Rights with Aggressive Creditors

Your Rights When a Creditor Bullies You

When you are struggling to make ends meet, the stress and anxiety can make your life miserable. The last thing you need is an aggressive creditor or collection agency calling you at all hours of the day or night, threatening you with legal action or even calling family or neighbors and telling them about your personal debts. You don’t have to be a victim of offensive or inappropriate tactics by bill collectors. You have rights.

Personal Debt

For a “personal, family, or household” debt, you have a wide range of rights under a federal statute, the Fair Debt Collection Practices Act (FDCPA). This law limits the hours during which a creditor or collection agency may call you. It also requires that debt collectors stop communicating with you if you provide written notice that you want no more contact. It also forbids communication with any third party (other than your spouse or attorney) except to obtain location information. (Note this does not apply to “business debts”, nor does it apply to a creditor who is contacting you to collect their own debt.)

If you have a debt collector or creditor who is harassing you, we recommend that you take the following steps:

  • Log all calls — Ask for the name of the debt collector and the company they represent. Get a phone number as well.
  • Hire an attorney — Once you are represented by counsel, you can simply tell all debt collectors to direct any further communications to your lawyer.
  • If debt collectors continue to call, record the conversation (you should always advise them that they are being recorded. Recording calls from states such as California can result in criminal or civil liability).

Business Debt

The FDCPA does not apply to business obligations. If you are being hounded because of a business debt, your best course of action is to retain legal counsel and to advise any debt collector that they must communicate only with your attorney. If they disregard your request, you should log all calls and record conversations, if possible.

Whether or not these laws apply, you may have other protections.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. To set up a meeting, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

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